Vote-on-account or account-for-vote?

Will Budget 2019 be a non-event?

Maybe a non-event for markets

But for voters, really?

Earlier this month, the finance ministry had suggested that it would present a full-year budget for the benefit of the economy. Such a move could have attracted a sharp criticism from the opposition parties.

But as per the latest media reports, the government is likely to follow the precedent of presenting a vote-on-account during in the election year.

For those who aren’t familiar with the term vote-on-account, it simply means seeking approval of the parliament to spend until the next government presents its budget. Vote on account and interim budget have the same connotation.

So what can you expect?

Many experts believe the NDA government will raise the personal tax exemption limit to Rs 5 lakh.

“Direct Tax should be reduced. If the Income Tax limit is raised from Rs. 2 lakhs to Rs. 5 lakhs, 3 crore people will save Rs. 24 crore which will lead to a small impact of 1 to 1.5 per cent of the National Tax Fund,” (Source: The Hindu)

Do you remember this statement? None other than Mr Arun Jaitley made it before the Lok Sabha elections in 2014 while addressing a rally in Amritsar.

So far the NDA government hasn’t offered any such relief to the middle-class tax payers. Will it walk the talk this time?

Has demonetisation buried the demon of tax evasion, finally?

On the corporate tax front, industry body FICCI has already demanded that the rate of corporate tax shall be fixed at a flat-25%, irrespective of the turnover.

Will lower corporate tax spur collections?

Relief for the farm sector

Despite hiking Minimum Support Prices (MSPs) and the budgetary outlay, farm distress has lingered, which, many experts believe has been one of the primary causes of BJP losing three state elections. Last year, the government allocated 12.9% more resources (on a Y-o-Y basis) for the development of the agriculture sector but it kept the total outlay (to the sector) as a percentage of total receipts unchanged.

Given the importance of agriculture in India’s GDP, the government may want to emphasize more on the development of the sector. Doubling farmers’ income by 2022 has been its mission. It remains crucial to see how smartly the government addresses farmers in the forthcoming interim budget.

Does more allocation really mean greater emphasis?

Besides agriculture, the government is likely to spend on infrastructure development, human resource development and infrastructure.

Any talk about the budget is incomplete without a mention of fiscal deficit. While it’s often measured as a percentage of GDP, we tried to find out the number as a percentage of total revenue receipts, simply because any discussion about deficit has to have a reference of receipts.

More room for populist announcements?

Disinvestment target would be crucial…

Over the last few years, the government has managed to bridge the gap in its revenues by raising money from disinvestments. But now the question is how long will it manage to keep up the pace, given the bad market conditions?

Selling family jewel to curtail deficits?(Source: Budget documents)

End note:

As we mentioned in KiskeSathKitnaVikas, the true indicator of Vikas is how many more people had their incomes rising in the periods under consideration.

Will the Interim Budget 2019 have some specific announcements that will mesmerize voters? That will decide whether or not vote-on-account will be an account-for-vote.

Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. The information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.